Discover the dark side of Investment

Signing international investment treaties, in the hope of attracting foreign investment, has been a central strategy for governments looking to improve economic development. The lesser known side of this story is that by signing investment treaties, governments are giving away the sovereign right to regulate in the interest of people and the environment and have exposed themselves to expensive law suits.

Developing countries in general, and Latin America in particular, receive the highest amount of law suits (litigations).

According to UNCTAD, “at least 89 governments have responded to one or more investment treaty arbitration: 55 developing countries, 18 developed countries and 16 countries with economies in transition. The largest number of claims were filed against

Argentina (51 cases)

Venezuela (25)

Ecuador (23)

Mexico (19)

Czech Republic (18)

Western European Countries have received the least amount of litigations

There are 20 known law suits against US. From those cases, 4 cases are still pending and all the rest have either being dismissed, discontinued or the Tribunal ruled in favour of the US.

What is the International Tribunal that rules on most of the cases?

The majority of cases are brought under the International Centre for Settlement of Investment Disputes (ICSID), institution of the World Bank Group that provides facilities for arbitration of investment disputes.

According to UNCTAD, out of the total 450 known treaty-based cases by 2011, 279 cases were brought under ICSID.

What are the key sectors of the economy that have been at the centred of law suits by corporations?

From all cases registered under the ICSID , 44% of all cases are related to natural resources extraction and public services (25% in oil, gas & mining sector, 13% in electric power & other energy sectors and 6% in the water sector)

What is the one country that never signed a BIT and yet receives the highest amount of FDI in the whole of South and Central America?

The implications of international investment treaties (November 2011)Video Interview with Gus van Harten
Associate Professor at York University, Canada, and author of the book, Investment Treaty Arbitration and Public Law (OUP, 2007), Gus Van Harten discusses specific cases of investor-to-state arbitration to highlight what are the key problems with international investment treaties.

Challenging Corporate Investor Rule. How the World Bank’s Investment Court, Free Trade Agreements, and Bilateral Investment Treaties have Unleashed a New Era of Corporate Power and What to Do About It, Institute for Policy Studies, April 2007 (pdf)

Corporate European Observatory report Investment rights stifle democracy which highlights how industry lobby groups, law firms and EU member states have manipulated the debate leading to the discussion about the future European investment policy in the EU Parliament (March 2011).

Regional or local governments since any measure by any authority is potentially threatened by private investors under BITs

Suggested questions:

Question 1: Is the sovereignty of our country to take general legitimate measures in the general interest and the protection of our environmental and social standards not threatened by the existing BITs binding our country?

Question 2: Do you think that the current BITs signed by our country include a good balance between investors rights and our government’s right to regulate for legitimate public concern policies, without the threat of being sued by corporations?

Question 3: Shouldn’t corporations be responsible for the business choices they make and bear the risks when things go wrong, just as small and medium enterprises (SMEs) have to?

Question 4: In the light of many studies that have concluded that investment treaties are neither necessary not sufficient for attracting foreign investment, does the government have evidence that by signing IIAs our country will attract more FDI?

Question 5: In the light of many studies which have concluded that foreign investment has fallen far short of stimulating broad-based economic growth and environmental protection, does the government have evidence that FDI coming into our country has had a positive effect on development?

A statement calling for a"Just EU Investment Policy now!"was developed and launched in March 2011. The statement is available in English - Italian - French - Spanish - Dutch and German and was signed by 114 EU civil society organisations, three international networks and 65 non-EU organisations (full list here). Both statement and petition were sent to 736 Members of the European Parliament on 4th April 2011.

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